Overview
Abercrombie & Fitch Co. has begun a formal review of its operations in China, considering several strategic options for the business there. Among the possibilities under consideration are the introduction of local partners and the sale of an ownership stake in the unit. The company has engaged an adviser to conduct the evaluation.
Scope and potential valuation
According to the review work under way, the unit being assessed could command a valuation in the range of several hundred million dollars should a transaction be pursued. Company officials and the adviser are still in early discussions, and the process remains exploratory - with no guarantee that any transaction will be executed.
Performance background
Abercrombie maintains a regional headquarters in Shanghai and has faced difficulties operating in the Chinese market. For the quarter ended May 2, the New Albany, Ohio-based retailer reported net sales of $1.1 billion, a small increase from the same quarter a year earlier, while net income contracted by almost 17% to $67 million.
Business model and channels
The company markets apparel, personal care items and accessories under its Abercrombie and Hollister brands. Its distribution footprint includes company-operated retail stores and digital channels, as well as a third-party wholesale business and franchise arrangements.
Current status
Executives and advisers remain in the information-gathering and evaluation stage. The deliberations are ongoing and may or may not culminate in a transaction involving local partners or a sale of a stake in the Chinese operations.
This article reports on the company’s announced review of its China business and recent quarterly results; it does not assert that a transaction has been agreed or finalized.